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In depth: How Rovio made Angry Birds a winner (and what's next)

This article was taken from the April 2011 issue of Wired magazine. Be the first to read Wired's articles in print before they're posted online, and get your hands on loads of additional content bysubscribing online.

Angry Birds is the first waste of 75 millions people's time that can be accurately quantified. Every day, users spend 200 million minutes -- 16 years every hour -- playing the mobile game.

Three trillion pigs have been popped. It has filled billions of those interstitial moments spent riding the bus, on a plane or in important work meetings, and it is or has been the number-one paid app on iTunes in 68 countries, as well as the best-selling paid app of all time. It went straight to the top of the new Mac App Store in January, selling 150,000 copies in its first week. Sixty thousand Angry Birds soft toys have been sold. In January, the trailer for the new Angry Birds Rio racked up 500,000 YouTube views in a weekend; on official videos alone, Angry Birds has had 27 million total views. In total, the "brand" has taken more than €50 million: not bad for a game that cost €100,000 to make. On the first anniversary of its release, 2,405 people in 756 cities worldwide wasted even more of their time holding events in celebration of "Angry Birds Day". David Cameron and Justin Bieber say they are fans. So do Paul Gascoigne and Salman Rushdie.

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On an island in the Pacific, the goal is to fling a squadron of kamikaze birds at gormless green pigs. The birds have just cause: the pigs stole their eggs. The swine took refuge in, and on, easily collapsible structures. The game is physics-based -- you adjust the trajectory and power of the slingshot with your finger -- and very, very addictive. Rovio, the Finnish developer behind the title, certainly got lucky. But Mikael and Niklas Hed, the cousins who run the company, also realised in early 2009 that the smartphone was about to become a new mass medium -- just one without the mass-media economics. So they methodically set out to create a new type of blockbuster, one with universal appeal, and use it to build an entertainment empire that would extend far beyond the iPhone. It would be Disney 2.0. "We set out to minimise the amount of luck that was needed," says Mikael Hed. "We felt we had done our best game so far. But the idea always was, this is the first step."

First they had to save a company in crisis: at the beginning of 2009, Rovio was close to bankruptcy. Then they had to create the perfect game, do every other little thing exactly right, and keep on doing it. The Heds had developed 51 titles before Angry Birds. Some of them had sold in the millions for third parties such as Namco and EA, so they decided to create their own, original intellectual property. "We thought we would need to do ten to 15 titles until we got the right one," says 30-year-old Niklas. One afternoon in late March, in their offices overlooking a courtyard in downtown Helsinki, Jaakko Iisalo, a games designer who had been at Rovio since 2006, showed them a screenshot. He had pitched hundreds in the two months before. This one showed a cartoon flock of round birds, trudging along the ground, moving towards a pile of colourful blocks. They looked cross. "People saw this picture and it was just magical," says Niklas. Eight months and thousands of changes later, after nearly abandoning the project, Niklas watched his mother burn a Christmas turkey, distracted by playing the finished game. "She doesn't play any games. I realised: this is it."

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That Angry Birds is set on a tropical island may be escapism. Rovio's offices are in Espoo, a 20-minute drive west of Helsinki. The dark-grey tower that houses Rovio is on a quayside, but the sea is frozen when Wired visits in January, with hobbyists ice-fishing on its surface. Inside, the office is nondescript, with grey linoleum floors and strip lighting. The 40-odd employees have been here only five months; they're already cramped and will move in a couple of months. A graphic artist works on a red bird icon,

replacing a Christmas hat with a Valentine's bow. A developer repeatedly drags her mouse over the desk, flinging blue birds at the blocks of a new level, frustrated that they wont fall quite right.

Mikael Hed, chief executive, and his cousin Niklas, chief operating officer, share an office with Peter Vesterbacka. They form a triumvirate that steers Rovio. Vesterbacka, 42, joined Rovio only in March 2010, as "Mighty Eagle". That's the title on his business card -- olderfashioned newspapers prefer the job description "head of business development in North America" when quoting him. (There's also a "bird whisperer", "marketing wingman" and "twitcher" in the office.) Vesterbacka is in Silicon Valley when Wired visits, doing what mighty eagles do and exploring potential business partnerships.

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Niklas Hed is blond and lithe. He founded Rovio in 2003 and is in charge of production, but functions as the hinge between Vesterbacka and Mikael. Mikael is the one who slows the other two down when their ideas and imaginations run ahead of them. He's four years older than Niklas and taller, with tidy brown hair. He speaks in a measured rhythm and takes questions patiently. Mikael has two young children, three and five, and in the midst of the Angry Birds frenzy last year decided to renovate his house. The first time that Wired visits, a 14-year-old boy from Utah has knocked Angry Birds off the number-one spot with a game called Bubble Ball. "It's happened before. So?" Mikael says, barely shrugging. "I know what we have coming up in the future, so I'm not too worried about it. And it's only in the free category."

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Angry Birds took eight years. Mikael and Niklas had been thinking about video games for long before that. Mikael grew up in the coastal town of Vastaa and moved to Helsinki when he was seven.

His father Kaj was an entrepreneur who founded several companies, including Trema, a financial-software business that was eventually sold to a private-equity house for $150 million in 2006. Niklas lived 45 minutes outside Helsinki. "We were always talking about games and trying to come up with ideas," says Mikael. Sakari Toivakainen, a childhood friend of Niklas, says, "Niklas was very into his physics games. He used to code in Pascal. He was 12 when he made this ball and it's moving. When he gets an idea, he never lets go."

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In 1996 Mikael completed a year of military service in the Finnish army, then attended business school in the south of France and New Orleans. In the meantime, Niklas enrolled to read computer science at Helsinki University. In 2003, he and two friends entered a competition held by Nokia and HP to create a mobile multiplayer game on one of the very first smartphones. They won. Vesterbacka, then at HP, was one of the organisers: "They created this really cool game," he says over the phone from San Francisco. "They asked me what they should do. I said, 'Start making games.'" Niklas founded Relude in 2004 and asked Mikael to be CEO. Mikael hesitated. "I couldn't see how that company could make money. But I felt this is what I wanted to do."

Mikael invested a few thousand euros of his own and rented an office. The Heds spent the first year devising a strategy and won subcontracting work for Digital Chocolate, a games developer. At the end of the year they renamed the company Rovio ("bonfire" in Finnish) and Michael's father Kaj -- who had just sold his stake in Trema -- invested €1 million. The company started expanding, but Mikael soon began to have misgivings. "It was good times in 2004: the world had recovered from the dotcom boom and bust," he says. "But I felt we should take a longer-term approach to building the business. We certainly didn't want to build a bubble." His father disagreed. In mid 2005, Mikael left Rovio: "It was between me and my father, so it was unavoidable that it became personal. My father was used to running his company and very hands on... And so I left." Niklas is reticent too: "It was a tough spot."

Mikael went into publishing, creating a series of comics starring a detective called August Jessor. At the same time, the Rovio business plan began to unravel: it was based on hits, and Rovio hadn't come up with any. "We tried to create a bubble and sell it fast," Niklas says. "But we started doing a lot of work for hire, for the big names: EA, Namco, Real Networks. We could make great games ourselves, but we didn't have the distribution or marketing. Mikael in a way predicted that." In 2007, Niklas began sacking employees. By 2009, the company had shrunk from a peak of 50 employees to 12.

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Niklas decided to reboot Rovio. He told Kaj that they needed Mikael. "It was a rocky road -- he had this conflict with his father," Niklas says. Kaj agreed, though, and approached his son. "We made a deal: this time he needs to be so that I can do things my way," Mikael says. "We were down to 12 people. And the company was in full crisis." (Kaj Hed declined an interview but remains chairman of the board of Rovio.)

Mikael's absence coincided with another, more significant development: the release of the iPhone in 2007 and the emergence of the App Store. Rather than negotiating individually with mobile manufactures and carriers, game developers could now reach an audience of millions through a single company, Apple. In a stroke, it solved the problem of distribution that had hindered Rovio. "The iPhone opened up the whole world," says Niklas. "You had one contact, plus worldwide distribution."

When Mikael rejoined the company at the beginning of 2009, he and Niklas sat down to work out a rescue plan. The app store was the integral part. They would continue to work for hire to make ends meet, but at the same time develop their own iPhone games, abandoning other platforms. "The iPhone was a hyper-competitive environment," says Mikael. "If we succeed there, we can go to other smartphones. And if we do well there, we can go to PC and console, and beyond. We planned this out well ahead of Angry Birds.

So we decided we needed to conquer the App Store: but how do we do that?" The Heds did their homework. "We tried to profile the iPhone user and it turned out that it was everybody," says Mikael. So their game would be for everybody, unlike the more niche sci-fi and horror titles that they had previously produced. Rovio came up with other criteria: the title had to be expandable to other platforms, but work as a pure iPhone game; it should be physics-based (popular on Flash websites at the time); there should be no tutorial; loading times should be minimal, so that you could play happily for just one minute; and it needed an icon which would stand out in the App store.

The team started going through concepts. Jaakko Iisalo, Rovio's principal games designer, would pitch ten ideas at a time, working them up into screenshots. In March 2009, Iisalo struck gold. "There was something about those characters," says Mikael. "These birds have no feet and can't fly. And they're really angry. We all started thinking about why they are so angry. For such simple characters, they made us think so much. There was some magic to it."

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At first the game was radically different from how we know it now: each coloured bird matched a coloured block; touch the block and the corresponding bird would fly up and destroy it. None of the birds had special abilities: instead, there were collectable eggs, which acted as power-ups. And you would keep and strengthen your own flock, as in Pokémon. Flinging the birds across the screen came later, but it was done by swiping your finger in the direction of the buildings, rather than with the catapult. The pigs were a later addition too: justification for the birds' wanton destruction of the buildings. They started out as featureless blobs; swine flu hit the news and they became sickly green pigs. But then test players consistently said they didn't understand why the docile-looking swine deserved such aggression, so the team came up with the back story of the pigs' stealing the birds' eggs.

Mikael dedicated a budget of €25,000 (the final cost would be four times that) and the team worked on it as a hobby project: "Whenever we had slack time we would do this," says Niklas. During the six months that the team worked on the game, they produced another four games for other companies. Rovio continued to refine the game into the winter. "When you had to shoot the bird once to test a feature, you accidentally started playing the game for 15 minutes, and there would be five guys watching you," says Iisalo. "We realised that we were on to something." Mikael agreed: "We felt we had done our best game so far." Angry Birds was Rovio's 52nd title.

Angry Birds hit the App Store in December 2009. It was a flop -- or at least it was for first three months in the lucrative English-speaking markets. Rovio wasn't concerned: its strategy wasn't a mad charge to the heart of the store, but a global counterinsurgency. "We realised very early on it would be tough to break those markets. So we tried to get a following in the smaller nations," says Matt Wilson, head of marketing. It took only a few hundred purchases to get the game to number one in the Finnish App Store.

The same went for Sweden and Denmark, then Greece and the Czech Republic. "Before having any traction in the UK and US, which are now 90 per cent of our market, we had 30,000-40,000 downloads in smaller nations -- not a huge amount, but probably four times what the average app sells," says Wilson. But they built a way in to the larger app stores, putting the game out through Chillingo, an independent publisher which had been successful with several titles and had a good relationship with Apple. "Once we could prove that we had got up in these different stores, then didn't fall," says Wilson, "we went to Apple with Chillingo and said, 'We've got something here.'"

On February 11, 2010, Apple agreed to feature Angry Birds on the front page of the UK App Store as game of the week. In preparation, Rovio made a YouTube trailer, only the second ever for an iPhone game, which has now had over 17 million views. The company also created 42 new levels, which went far beyond those of the simplistic first episode in imagination and design. Finally, Rovio made a free, Lite version. All three were released within three days. After it was featured, the app jumped from the around 600th to first in the App Store. "The sales hit a different level," says Mikael. "It was April when we went to number one in the US." It hasn't budged from the top-ten since. Rovio had their hit.

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After the App Store, Angry Birds expanded to Android, where it has had 20 million downloads. This January, it was one of the launch titles for Apple's Mac App Store and sold 150,000 copies (at £2.99 in the UK) in the first week, going straight to number one. When Angry Birds hit GetJar, an independent, cross-platform app store, the demand crashed its servers. Ilja Laurs, GetJar's CEO, says that the platform is built to be able to withstand up to three times the expected demand for a title. Angry Birds came in at seven times. "I have to admit that the demand was a little bit beyond our expectations," Laurs says. "It does literally appeal to everybody, no exception."

It was designed to. Mark Griffiths is a professor of psychology who also heads the International Gaming Research unit at Nottingham Trent University. "It's very similar to the research I do on gambling," he says. "When you can pinpoint where you went wrong, this is called a near miss. It's used all the time in terms of how scratch cards and slot machines are designed. When we fail to win, we create a reason in our mind why we didn't. The losses effectively become near-wins and feel 'cognitively frustrating'.

And the only way you can get rid of that frustration is to go back to the start and play again." A 2008 study, conducted by Carmen Rusiello, director of the East Carolina University psychophysiology department, and funded by games developer Popcap, found that the "cognitive distraction" provided by casual mobile games such as

Bejeweled significantly improved players' moods and stress levels among the 134 tested. "It's also incredibly simple," says Griffiths. "If it were too complicated, people wouldn't persist. Addictions in the true sense are about constant rewards. I've never met anyone addicted to a bi-weekly national lottery, because there's only two chances a week. On a slot machine, when you can gamble 30 times a minute, that's very rewarding. On a game like Angry Birds, it's every few seconds."

Iisalo developed the game with this in mind. "There's the one key shot you have to do in every level," he says. "But I tried to build the game so that there are two layers. The one-star, finish-the-level layer, which is casual, and also the three-stars level -- hardcore. So that my mother can enjoy the game, and I can enjoy the game."

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Rovio realised that the old rules of distribution -- put a disk in a box, charge £50 for it and leave it there -- didn't apply. The company created an active, continuous relationship with the customer. It offered regular updates for nothing, to keep people playing and talking about the product: "Our game is a great way to communicate with the customer," Mikael says. The team resolved to answer every tweet and fan letter that came in. They incorporated levels designed by fans and discussed their ideas for new birds (among the suggestions: a phoenix bird that ignites the structure). "People felt that here's a gaming company that actually cares,"

Mikael says.

According to Mikael, Angry Birds has become "the touchscreen game." But Birds isn't just a fun distraction -- it actually taught many iPhone owners how to use their toy.

James McQuivey is an analyst in digital entertainment at Forrester: "We only just learned how to do touchbased computing. It's such an intuitive experience that we get hungry for that. And Angry Birds trains a deep part of your brain and rewards you every time you succeed."

But as well as an innovative game, Rovio also designed an innovative business model. "We saw on the iPhone that paid content works," Vesterbacka says. Consumers pay for the initial download and Rovio keeps the game fresh with updates. On Android, they saw that paid content wasn't working, so went with an ad-supported model. It now earns them more than £600,000 monthly. In December they introduced the Mighty Eagle, a bird you can buy in-app that clears any level. Priced at 89p, it has been downloaded two million times and cost Rovio next to nothing. Over Christmas, Angry Birds started offering cuddly toys -- purchasable right from the app. The initial order was for 12,000, but Rovio sold five times this, earning revenues of more than £600,000 each month, says Mikael. And this February, the company launched the Bad Piggy Bank, a mobile payment system that will allow users to buy in-game purchases at the touch of a button, without having to enter creditcard details. It's an effort to monetise those Android users who are willing to pay for an ad-free experience. The system will host other games and Mikael says that developers will receive 85 per cent of all revenues. "You can expect to see Bad Piggy Bank online as part of Facebook," says Vesterbacka. "It's bigger than just Android."

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For the initial outlay of €100,000 (the company has since invested more), Rovio has had 20 million paid downloads for the iPhone and iPod Touch, and 20 million ad-supported downloads on Android. Ville Heijari, Rovio's spokesperson (the "bird whisperer") says both generate similar revenues. Combine that with money from the Mighty Eagle, Mac App Store and other platforms such as Palm Pre and Intel App-Up. Then consider that Mikael says that 40 per cent of Rovio's income stems from activities not directly related to games -- the toys and other licensing deals. Estimates put Rovio's total revenues to date at close to £50 million. The company is well placed to exploit an app economy that will have 970 million potential customers by 2013, according to mobile market-research company Research2Guidance, and be worth $30 billion by 2015, according to telecoms-industry analysts Juniper Research.

Electronic Arts claims that the mobile gaming business will be worth $4.5 billion in 2013. Rovio will take its slice of that. But it also wants much, much more. "I am convinced," says Mikael, "that this is not just one game with a slingshot."

In November 2010, Andrew Stalbow, then a vice president of Fox Digital Entertainment, approached Mikael. The film studio 20th Century Fox was planning the release of a brand new animated feature, called Rio. Perhaps they could collaborate. "It was a movie about birds," says Mikael. "It was a natural fit."

A week ahead of the release of Rio, Rovio will launch

Angry Birds Rio, an entirely new game for the iOS platform. Wired played three of the levels in progress and found it to be business as usual. But the pigs are gone (replaced by hanging monkeys), the physics have been tweaked and new objects added, such as bouncy palm trees and working motors. Instead of popping pigs, you free captured rare birds from cages by bombarding them with your own flock -- more or less the plot of the film. But it's a big step for Rovio's entertainment empire. During halftime in this year's Superbowl -- where 30 seconds cost $3 million -- Angry Birds showed up in an ad spot for Rio. "It's a massive deal for us in the sense of visibility," says Heijari. "Rio is also taking it into the more storytellingoriented direction that we will want to do with future Angry Birds titles." This tightly controlled, incremental approach is how Rovio will extend its brand and, for Mikael, this was always the plan. "We always felt like the game was a brilliant way to get visibility for a brand, to build a huge audience for it. And that in turn will allow us to build a big business around that. This is the first step."

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So what's the next step? First up is Facebook.

Angry Birds will invade this year, but Hed won't be drawn on specifics. "There will be completely new aspects to it that just haven't been experienced on any other platform." Because of its collaborative nature? "Yeah. The pigs will have a more prominent role."

After that, Rovio plans to create new games featuring Angry Birds characters (Vesterbacka says driving and sports games are a definite possibility), the first coming out before Christmas this year. At the same time, the original Angry Birds will hit the Wii, Xbox 360 and PS3. There are plans for a TV series, says Mikael, and a movie -- although nothing has been signed. "We're building an integrated entertainment franchise where merchandising, games, movies, TV, cartoons and comics all come together," Vesterbacka says. "Like Disney 2.0." That's a huge claim. "Look at how Disney got started," says Mikael. "Steamboat Willie created Mickey Mouse, then they added more characters. You can see the same pattern today, but everything is happening much, much faster. Other brands used to build recognition over the course of decades. We've done it in one year."

Rovio may be rising more quickly than Disney did, but it could fall much faster. "In 100 years, we'll likely still be talking about Mickey Mouse -- but not about Angry Birds,"

McQuivey says. The open nature of the market and the short attention span of consumers that Angry Birds so successfully tapped in to could also spit it out. "The race right now is to get distribution muscle," says Tim Chang, a venture capitalist whose investments include Ngmoco, the mobilegaming company acquired by DeNA for a reported $400 million. "Zynga was built for Facebook and Ngmoco has a head-start on iOS." EA is the biggest current player. It acquired Chillingo (but not Angry Birds) for a reported $20 million and has a 32 per cent market share in smartphone games, according to Comscore. Rovio needs to evolve from a studio with strong intellectual property (IP), to being a publisher that isn't over-reliant on a single hit game. There's the rub: it took Rovio 52 games to get its first hit. To create a fully fledged entertainment empire, it will need more. Mikael says he is in no rush. "We will continue on our path. We are focusing on strong IP, strong brands."

The team is prototyping entirely new concepts, just as they did back in 2009: "I think you'll see them next year," says Mikael. In the meantime, Vesterbacka says they are building distribution muscle: "We are building our infrastructure with Angry Birds. So we have the distribution, the marketing, everything in place, so that we can basically take any IP and drop it in. And we have the capability of producing the games on all the platforms -- smartphones, consoles, PCs, Mac, online, Facebook -- you name it. Then the TV, the movie side, it will happen when the time is right."

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Both of the Heds have seen Rovio collapse once already. "I know how fragile the gaming industry is," says Niklas. "I'm super-paranoid. But I feel at the moment that we are walking. We should be running." Mikael checks him: "We're not trying to take over the world in one giant leap."